Tuesday, July 22, 2014

"An important need to restructure"

It is clear that in an economy with an important need to restructure and hire workers in new sectors, unemployment is the result of the positive match surpluses that result from appropriability. . . . Thus, unemployment is an equilibrium response of the economic system, and it serves to restrain the bargaining position of workers in the presence of appropriability. This preserves the profitability of investment. . . . Periods of adjustment and intense gross hiring require high transitional unemployment to prevent surges in shadow wages. Unemployment keeps shadow wages at a level that makes job creation pay off.

This is from page 212 of Ricardo Caballero's Specificity and the Macroeconomics of Restructuring (2007), which I have found very useful. Here are charts of gross output and employment by sector in the vicinity of the Great Recession (click for larger images):

I'm just thinking; I don't have anything else to say about these right now.

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